Out of game it is used to imply a "cheap shot" or "low blow".
Gamer 1: WTF!? He killed you?
Gamer 2: Yeah, hit me with a nub nade
Gamer 1: Wow... you suck. lol
Out of Game Example
Boy 1: *Gets sucker punched*
Boy 2: Nub nadded!
ETplayer: only cos u used the nub nade, num nuts *geez*